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November 2007

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Stocks on sale for income investors?

November 21, 2007 – Comments (5)

This morning, US treasury bond yields were about 4% for the 10-year, 3% for the 2-year.  A while back, I did a quick analysis comparing the long term income stream from bonds to a portfolio of dividend paying stocks.  At that time, it took 5-years for the model’s dividend income stream to catch up with the bonds.  Since then, stock prices have fallen, raising their dividend yield and bond prices are up, reducing their yield.  At this point, there is very little difference between bond yields and the dividend yield of some quality companies.  For an investor with a taxable account, the after-tax yield on many dividend paying stocks would exceed the yield on treasuries.  [more]

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